A “Carrier” Is Sinking

Despite pronouncements from the business community that a comprehensive reform of the nation's system for distributing securities is dead, the agency proposing the omnibus measure isn't abandoning ship.

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Despite pronouncements from the business community that a comprehensive reform of the nation’s system for distributing securities is dead, the agency proposing the omnibus measure isn’t abandoning ship. The massive overhaul, nicknamed the Aircraft Carrier proposal because of its size and complexity, was launched by the Securities and Exchange Commission more than a year ago.

Designed to streamline the securities issuance process, including allowing the largest public firms to skip final prospectus delivery and SEC review before going to market, the proposal encountered heavy criticism because, opponents say, it proposed to fix some areas of securities issuance that didn’t need fixing.

“The commission keeps adding reporting requirements and then expects to get them quicker,” says Richard H. Rowe, a partner with Proskauer Rose LLP, in Washington, D.C. “They tried to do too much.”

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Parts of the measure may be carved from the proposal for SEC action, but the bulk of it will sleep with the fishes, according to Bryn R. Vaaler, an attorney with Dorsey & Whitney LLP, in Minneapolis. “The criticism of the rules were quite negative, and there was a lot of concern from Wall Street about them,” he says.

A possible candidate for separate treatment by the commission is a provision that would remove many of the restrictions on communication before stocks are offered to investors. The SEC has shown concern about companies conditioning the market before an offering, and has imposed tight control of communications during that time. Now the SEC appears to have reversed its thinking on the issue. “It sees the danger created by not informing the market to be greater than the danger of conditioning the market,” Vaaler says.

“The SEC just sees the onslaught of communication technology as overwhelming,” says Vaaler. “They’re standing with their finger in the dike, so they might as well make it legal.”

The SEC says “Aircraft” obituaries may be premature. “We’re still looking at it, and a reproposal may be in order,” says the SEC’s Anita Klein, senior counsel to the director.